St. Kilda Enterprises produces parts for the electronics industry. The production manager and cost analyst reviewed the accounts for the previous month and have provided an estimated breakdown of the fixed and variable portions of manufacturing overhead. Fixed Variable Total Indirect materials$2,000 $7,000 $9,000 Indirect labor 1,500 15,500 17,000 Supervision 8,000 2,500 10,500 Depreciation 35,000 3,000 38,000 Maintenance 15,000 20,000 35,000 Total$61,500 $48,000 $109,500 Direct materials for the month amounted to $92,500. Direct labor for the month was $187,500. During the month, 12,500 units were produced. Required: a. No changes are expected in these cost relations next month. The firm has budgeted production of 16,250 units. Provide an estimate for total production cost for next month. b. Determine the cost per unit of production for the previous month and the next month.

a. Budgeted production  cost for next month is $ 487,900

b Total production cost per unit for the previous month - $ 31.16 per unit

   Total production cost per unit for the next month - $ 30.02 per unit

Explanation:

Computation for production cost for previous month

Variable manufacturing overhead                                            $   48,000

Direct Labor                                                                                $  187,500

Direct materials                                                                          $    92,500

Total variable costs                                                                    $ 328,000

Fixed manufacturing overhead                                                 $    61,500

Total manufacturing costs                                                       $  391,500

No of units produced                                                                        12,500

Variable cost per unit ( $ 328,000 / 12,500)                       $     26.24 per unit

Fixed cost per unit                                                                 $      4,92 per unit

Total production cost per unit for previous month          $      31.16 per unit

Computation of total production cost for next month

Variable production costs per unit    $ 26.24 per unit

Budgeted production                             16,250 units                

Total variable production costs for next month  

$ 26.24 per unit * 16,250 units                                                 $ 426,400

Add: Fixed production costs                                                     $   61,500          

Total production costs for next month                                   $ 487,900    

Computation or per unit cost for next month

Total production cost/ No of units budgeted

$ 487,900/ 16,250                                                     =            $ 30.02 per unit      

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